UK house prices are expected to break records over the coming months as buyer activity outstrips the number of new sellers, according to new research.
The average price of property coming to market jumped 0.8 per cent – or £2,589 – this month, just £40 short of a new all-time high.
The house price boom is being driven by the release of pent-up pressure following the General Election, and experts said the growth would gain further momentum on the approach to spring.
Online estate agent Rightmove said monthly traffic was up 7.2 per cent on the previous year, and the number of sales agreed nationally was up 12.3 per cent.
In London, the number of agreed sales jumped 26.4 per cent compared to last year, according to data from Rightmove.
Rightmove director and housing market analyst Miles Shipside said: “There is a boom in buyer activity outstripping the rise in the number of new sellers, which we expect to lead to a series of new price records starting next month.
“The average price of newly-marketed property is just £40 below its all-time high from June 2018, with the typically busy spring market still to come.
“This means that spring buyers are likely to be faced with the highest average asking prices ever seen in Britain.
“Buyers who had been hesitating and waiting for the greater political certainty following the election outcome may be paying a higher price, but they can now jump into the spring market with renewed confidence.”
UK house prices jumped 4.1 per cent in January on an annual basis to come close to a two-year high, fresh figures from Halifax showed today.
Homes rose 0.4 per cent in value compared to December, and climbed 2.3 per cent on a quarterly basis, Halifax’s house price index revealed.
Russell Galley, managing director of Halifax, said:
House prices kicked off the year with a modest monthly increase, rising by 0.4% in January following the stronger gains of 1.8% and 1.2% seen in December and November respectively. As a result, annual growth remained relatively stable at 4.1%, up just a fraction from the end of 2019.
A number of important market indicators continue to show signs of improvement. We have seen a pick-up in transactions with more buyer and seller activity consistent with a reduction in uncertainty in the UK economy. However, it’s too early to say if a corner has been turned. The recent positive figures may actually represent activity that would ordinarily have been expected to take place last year, but was delayed by economic uncertainty. So while housing market activity has undoubtedly increased over recent months, the extent to which this persists will be driven by housing policy, the wider political environment and trends in the economy.
Looking ahead, we still expect a moderate rate of house price growth over the course of the year. Demand is likely to continue to exceed the supply of properties for sale across the UK, with the subdued pace of new building also adding to upwards price pressure. The environment for mortgage affordability should stay largely favourable. However with the growth in rental costs accelerating, many first-time buyers will continue to face a significant challenge in raising necessary deposits.
UK house prices growth ‘impressive’
“It looks impressive that house prices were still able to rise by 0.4 per cent in January given the size of the jumps seen in both December and November,” Howard Archer, chief economic adviser to the EY Item Club, said.
He pointed to the big surge in quarterly hikes in UK house prices. Homes rose 2.3 per cent in value for the November to January period compared to the previous quarter’s one per cent rise. And that was better than a 0.2 per cent quarterly jump recorded in November.
But Archer warned 2020 will remain a difficult year for the UK.
“The economy still looks set for a pretty challenging 2020 and there will still be appreciable uncertainties,” he said in a reference to Brexit trade deal negotiations.
“The upside for house prices in 2020 is likely to be limited.”
EY still raised its predictions for UK house price growth in 2020, however, from twoper cent to 2.8 per cent.
“There is clearly a possibility that they could rise more than this,” Archer added.
Election’s feel-good factor
Marc von Grundherr, director of lettings at estate agent Benham and Reeves, hailed the rise as evidence of a post-election “Boris bounce”.
“It would seem that the Boris bounce in market activity that followed December’s election has blown market expectations out of the water,” he said.
“Given the months of market decline and the seasonalities involved, this turn around is really quite remarkable and demonstrates the absolute resilience of our bricks and mortar market.”
He added that a “Brexit-inspired bump” could further boost the housing market for February and a further jump in spring could come with the 11 March Budget.
House prices are showing signs of recovery across the UK, with the highest house price growth in 2019 reported in December, at 1.7 per cent, pushing the average house price growth for the year as a whole to four per cent.
This puts the expected house price growth for 2020 up from the previously expected two to three per cent, and this expectation sends a clear signal to prospective home buyers to act quickly if they’re planning to take out a mortgage this year.
The latest Halifax House Price Index shows that mortgage approvals were slightly up towards the close of the year, so it’s certainly not a bad time for mortgage applicants solely in terms of getting the green light on their residential loan.
However, the current housing statistics also point to an ongoing lack of supply of suitable housing. Buyer demand showed a significant upward trend in December 2019 – up 17 per cent according to RICS, and in marked contrast to the negative trend in buyer enquiries observed in October and November 2019.
January is traditionally a much busier time for the housing market than December, and there are already indications that demand has risen yet again this month. Without a doubt, the outcome of the General Election has had a positive effect on what’s known as ‘buyer sentiment’. More people are at least willing to start making enquiries, although it’s important to remember that enquiries don’t all automatically translate into transactions, which have increased by a more modest nine per cent.
But what about the supply of houses to meet this returning buyer confidence? This is where the market is not catching up, with the overall positive narrative of a house market returning to good health. New instructions rose by nine per cent at the national level, and in London and the South East, they remained more or less flat. This means that, on average, housing supply is just about increasing at a rate that is able to satisfy the return in demand, and, in some regions, it isn’t increasing proportionally at all. Managing director of Halifax Russell Galley comments:
‘Looking ahead, we expect uncertainty in the economy to ease somewhat in 2020, which should see transaction volumes increase and further price growth made possible by an improvement in households’ real incomes.
‘Longer-term issues such as the shortage of homes for sale and low levels of house-building will continue to limit supply, while the ongoing challenges faced by prospective buyers in raising deposits will serve to constrain demand. As a result, we expect a modest pace of gains to continue into next year.’
What does this mean for you if you are a prospective buyer? Now is not the time to hesitate: a once-again buoyant housing market that demonstrates a lack of supply will mean that competition for the best homes in the most desirable areas (especially outside London) will be tougher. So, if you’ve seen a nice property and you are in a position to buy, don’t wait.
UK house prices grew at their fastest rate in over a year at the start of 2020, according to Nationwide, as experts hailed Boris Johnson’s election victory.
The housing market posted a 1.9 per cent annual rise in January, beating December’s 1.4 per cent climb. That followed 12 months of consecutive growth below the one per cent mark after November 2018’s 1.4 per cent hike.
Growth in UK house prices rose 0.5 per cent between December 2019 and January 2020, Nationwide’s figures also showed today.
That left the average UK home valued at £215,897.
‘Boris bounce’ boosts UK house prices
“Sparks were flying after the election but this month the housing market has ignited, with the so-called Boris bounce providing the match,” Lucy Pendleton, founder of James Pendleton estate agents, said.
“A year ago the annual growth rate was just 0.1 per cent. This step change in house price growth is being driven by a resurgence of demand and, with it coming before we’ve even left the EU, is clearly significant.
“Boris Johnson’s emphatic election victory has retrieved the spanner from the works and the housing market is now positively humming.”
Nationwide’s figures follow UK Finance data revealing that home buyer mortgage approvals also soared 24 per cent in the run up to Christmas.
But Nationwide chief economist, Robert Gardner, took a more measured view of January’s growth.
He said: “The underlying pace of housing market activity has remained broadly stable, with the number of mortgages approved for house purchase continuing within the fairly narrow range prevailing over the past two years.
“Healthy labour market conditions and low borrowing costs appear to be offsetting the drag from the uncertain economic outlook.”
He added that economic growth slowed dramatically at the end of 2019, but business surveys are pointing up at the start of 2020.
‘Step change’ in sentiment
David Westgate, chief executive at Andrews Property Group, hailed January’s growth in UK house prices as a “step change” in buyer demand.
“While prices didn’t skyrocket in January, compared to just three months ago the mood in the property market has changed quite materially,” he added.
“People who were hesitant amid the political uncertainty of recent years are now making their move. January can always be a bit slow but the signs for the Spring as a whole are very promising.
“There is a huge amount of pent-up demand in the market and we are already seeing it start to come through.
“Crucially, even aspirational movers are coming back to the market, which highlights how sentiment has improved.”
Average UK house prices jumped by 2.3% in December, a record for that month, according to Rightmove.
The online property website said that last month’s rise in average house prices was the biggest December jump since it started its house priced index back in 2002. Rightmove revealed that almost 65,000 properties were put onto the market in December at an average asking price of £306,810.
Miles Shipside, a director and housing market analyst at Rightmove, said the recent surge in house prices was down to the increased political stability in the UK following December’s General Election and the following easing of Brexit uncertainty.
“These statistics seem to indicate that many buyers and sellers feel that the election result gives a window of stability,” said Mr Shipside. “The housing market dislikes uncertainty and the unsettled political outlook over the last three and a half years since the EU referendum caused some potential home movers to hesitate.
“There now seems to be a release of this pent-up demand, which suggests we are in store for an active spring market, with more properties being listed by new sellers than we have seen in recent years.
“One factor behind the upwards price pressure has been the shortage of property coming to market, with 2019 numbers down by 19% on 2018 and some would-be sellers postponing their moves until they judge the outlook to be more certain. This month sees new seller numbers still down on the prior year, but by a less dramatic 10%.
“While there may well be more twists and turns to come in the Brexit saga, with London prices now rising again and not enough properties to satisfy this buyer demand, there is an opportunity for sellers to get their property on the market for spring move unaffected by Brexit deadlines.”
Tom Bill, head of London residential research at estate agent Knight Frank, said: “The reason for this uptick includes the relatively benign global economic backdrop, ultra-low mortgage rates, the currency discount and the fact prime residential markets have re-prices in response to political uncertainty and tax changes.
“In the final quarter of last year, there were 10 new buyers for every new property listed in prime central and outer London, the highest ratio in more than 15 years.”
The decisive result of the General Election sparked a record-breaking surge in UK house prices in December and January, in the latest sign that the UK housing market has been revitalised by a “Boris bounce”
There was a 2.3 per cent monthly surge in the average price of property coming to the market between 8 December and 11 January, the largest jump ever for that time of year since Rightmove records began in 2002.
Nearly 65,000 properties were put on the market during the period, meaning most were advertised for sale following the General Election on 12 December, according to the property platform’s House Price Index.
There has also been a jump in buyer demand since the Conservative election victory.
Enquiries to estate agents between 13 December and 15 January were up 15 per cent compared to the previous year, with an extra 1.3m buyer enquiries following the election.
The number of sales agreed spiked by 7.4 per cent during the same period as buyers made the most of the renewed political uncertainty offered by the election result.
Rightmove director and housing market analyst Miles Shipside: “These statistics seem to indicate that many buyers and sellers feel that the election result gives a window of stability.
“The housing market dislikes uncertainty and the unsettled political outlook over the last three and a half years since the EU referendum caused some potential home movers to hesitate.
“There now seems to be a release of this pent-up demand, which suggests we are in store for an active spring market.”
London’s property market has also benefited following the General Election, as the capital saw a sharp increase in buyer interest and sales prospects. In December, 31 per cent of chartered surveyors saw a rise rather than a fall in enquiries from new buyers, up from minus 12 in November, according to the latest Rics data.
“We have absolutely seen a post-election bounce, quite substantially actually,” Marc von Grundherr, a director at Benham & Reeves in London, said.
“Things usually quieten down before Christmas, but we had three times the number of offers in the last two weeks of December than the first two weeks.
“People have been waiting for stability, and the moment it arrived, confidence in the market has increased significantly.
“There has been a dramatic Boris bounce, so to speak, with real optimism among buyers still getting good value. But it’s also not a bad time for sellers as stock levels are still relatively low.”
UK house prices rose by 2.2% in the year to November, to an average of £235,000, according to the latest data from the Office for National Statistics (ONS).
Average prices rose by 1.7% in England (to £251,000), with a 7.8% jump in Wales (to £173,000), a 3.5% rise in Scotland (to £155,000), and a 4% rise in Northern Ireland (to £140,000). In London, prices rose by 0.2% – not much, but a big improvement on the negative readings seen for most of last year.
In all, it paints a picture of a housing market that is showing signs of rallying. Particularly if you look at it on a chart, as per the ONS one below.
Putting it bluntly, that’s not necessarily good news. As we’ve been pointing out at MoneyWeek for a couple of years now at least, it would be best if house prices continued to flatten or fall gently, to allow earnings to play catch up.
In the absence of a better solution – which would involve a lot of political finesse, long-term thinking, and the tackling of a lot of vested interests, and thus seems unlikely – this is the easiest and least painful way to return house prices across the UK to some sort of semblance of affordability.
A rebound now would jeopardise that. So how seriously should we take the figures?
One point to note is that the ONS figures, while official, are relatively new compared to other long-running surveys such as those compiled by Nationwide or Halifax. You can see that they still need to iron out aspects.
That near-8% jump in Wales does rather stand out. Apparently, it’s down to two things – there was a rise in the number of expensive properties were being bought and sold in the likes of Cardiff (in other words, the typical house sold last month was more expensive than ones in previous months), and also, the large year-on-year rise was exaggerated by a “fall in prices during the same period in 2018.”
So the figures are worth taking with a pinch of salt.
That said, there are some reasons that you might expect a rally of sorts, and it’s worth considering them. November’s figures are unlikely to show any bounce related to politics – after all, these deals were all done before the election.
However, house prices have been flat or falling for some time, and importantly, mortgages have grown cheaper over the year – according to Moneyfacts.co.uk, the cheapest five-year fix for someone with just a 5% deposit, came in at 3.37% in January, but 2.75% in November. So the availability of cheaper credit combined with a sense that it might be a buyer’s market, may be helping things.
Meanwhile, the worst of the landlord exodus may be behind us – while there are still tax changes to come, those who are still hanging on in there must surely have some idea of what it’s now costing them to do so.
If indeed, cheaper loans are helping to boost prices, then it could continue – particularly if the Bank of England does decide to cut rates again. Combine it with a sense that foreign buyers are back in the market at the top end to bag a bargain while sterling is still weak ahead of Brexit, and we could see a sustained bounce in 2020.
Frankly, we hope it doesn’t happen. And arguably, credit conditions can only slacken so much further. But that’s the key thing to watch if you want an idea of where prices will go – what price is a mortgage and how easy is it to get? If they get even cheaper and more accessible than they are now, then all else being equal, prices will go up.
Halifax data shows UK house prices posted their strongest monthly increase in nearly 13 years in December with a +1.7% month-on-month, taking the year-on-year increase to 4%.
The December General Election result appears to have boosted market sentiment according to some industry insiders, as the Conservative majority delivers the UK some relative political stability when compared to the recent past.
Marc von Grundherr, Director of Benham and Reeves, says “last month’s election helped to reignite the smouldering embers of an otherwise weary property market. Not only is this boost immediately evident within December’s monthly and annual top line growth, but those of us on the front line also enjoyed an almost immediate uplift in buyer interest and commitment to transactions.”
von Grundherr says a large degree of uncertainty remains until a trade deal is officially done between the EU and UK, “but even a mere step in the right direction has been enough to steady the ship considerably and this bodes well for the year ahead.”
House prices Halifax
“While mortgage affordability remains very favourable, we’ve also been promised an economic boost via the first budget in four decades as a non-EU member state, all of which should help build buyer confidence and continue to restimulate house price growth,” adds von Grundherr.
Halifax say they expect uncertainty in the economy to ease somewhat in 2020, which should see transaction volumes increase and further price growth made possible by an improvement in households’ real incomes.
Houses for sale
Also underpinning the increase in prices is a familiar supply-and-demand dynamic whereby a housing shortage means buyers are asked to fork out yet more money for their desired property.
“Longer-term issues such as shortage of homes for sale and low levels of house-building will continue to limit supply, while the ongoing challenges faced by prospective buyers in raising to limit supply, while the ongoing challenges faced by prospective buyers in raising deposits will serve to constrain demand,” say Halifax.
Halifax say they expect a modest pace of gains to continue in 2020.
“An unyielding appetite from the nation’s aspirational first-time buyers and a resolute new build sector have ensured that while the rate of price growth has been muted, there has been no meaningful declines. With the worst now hopefully behind us, these two areas of the market should continue to go from strength to strength over the coming year and help drive performance back to previous health,” says the founder and CEO of Stone Real Estate, Michael Stone.
House prices were 1.4 per cent higher year-on-year in December, the first rise of more than one per cent for 12 months.
According to research from Nationwide, after seasonal factors had been considered prices rose by 0.1 per cent in December.
Numbers of first time buyers have also continued to recover, reaching 354,400 in the twelve months to October.
The figure is more than double the 155,000 recorded in 2009 and 12 per cent below the 2006 peak.
Nationwide’s chief economist Robert Gardiner said that despite volatile economic indicators for much of 2019, the UK’s housing market had remained broadly stable.
He added: “Looking ahead, economic developments will remain the key driver of housing market trends and house prices.
“Much will continue to depend on how quickly uncertainty about the UK’s future trading relationships lifts as well as the outlook for global growth.
“Overall, we expect the economy to continue to expand at a modest pace in 2020, with house prices remaining broadly flat over the next twelve months.”
However, London prices fell for the tenth consecutive quarter, with an overall annual decline of 1.8 per cent.
Despite the continued decline, prices remain only five per cent below the all time highs of 2017.
David Westgate, chief executive at Andrews Property Group, welcomed the news:
“Christmas and the small matter of a General Election made December difficult to read but the fact that annual price growth was above one per cent for the first time in a year will be seen by many as a positive precursor to 2020.
“There is an exceptional amount of pent-up demand in the market that has the potential to drive prices higher. Add to that continued low borrowing costs and the strong jobs market and you have all the ingredients for growth.”
Jonathan Samuels, chief executive of housing lender Octane Capital, said he expected London’s performance to improve this year:
“London may have been the weakest performing region in 2019 but that may well change this year.
“The capital certainly won’t be returning to the obscene growth rates of yesteryear but it may drag itself off the bottom of the table.”
The price of a home in the UK has more than trebled since the turn of the century, new research has revealed.
The average UK price in 1999 was £91,199 and has now risen to £279,997, representing an increase of over 200 per cent. In Scotland, prices have risen by 173 per cent, from £68,959 in 1999 to £187,533.
London and East Anglia jointly saw the biggest increase, at 284 per cent. – while two local authorities within London have seen average house price increases of over 400 per cent since the end of 1999. Property prices in London are by far the highest in the UK now at £338,536. In 2000, the house price to earnings (PE) ratio – which is calculated by taking the average earnings in a region as a proportion of average house prices in that region, – sat at 5.4.
However, by the end of 2019 this has rocketed to 10.8. North of the Border, the PE ratio stands at 5.3.
Over the past 20 years, Scottish house prices for first time buyers have risen by 212 per cent – from £48,683 in 1999 to £151,847 today.
Russell Galley, managing director at Halifax, which carried out the research, said: “The rise in house prices in London since the turn of the century is well documented, and a sharp decrease in affordability just shows how quickly the market has moved.
“Conversely, there are bargains to be had elsewhere such as in the North, Scotland and Northern Ireland where prices have been slightly more subdued and properties compared to earnings are comparatively affordable. A renewed focus on housing policy and increased infrastructure investment aimed outside the South East, for example, may go some way to rebalance the differences.”
He added: “New buyers are hugely important to the overall health of the UK housing market. Despite a shortage of homes and the ongoing challenge of raising deposits, we know that the number of first-time buyers is moving in the right direction.
“Key to this is continued low mortgage rates and a wealth of options available to first-time buyers, helping to support even more step foot on the ladder.”
While every region saw houses, at the very least double, in value, residents in Northern Ireland experienced the least dramatic increase at 139 per cent, or £97,056. Richmond-upon-Thames in London has seen the smallest change in its first home house price to earnings ratio, increasing by just 0.4. However, in 2000, the area was already the most unaffordable according to this measure at 7.2.